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September Brings the Fall Once Again

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Before this week of trading, September 2023 was proving to be more resilient than your normal run-of-the-mill sell-off month, which is more or less what it’s become known as. Good year so far? September will roll off your excess margins. Bad year so far? September will make sure it stays that way. This year — until this week — we looked as if we might buck the September doldrums.

But it was not to be. Going back to last Friday, where all major indices except the small-cap Russell 2000 had peaked, we’ve taken an unmistakably bear turn. From those highs, the Dow is -2.5%, the S&P 500 — currently having its worst one-week performance since March — is -3.3%, the Nasdaq -4.85% and the Russell -4.32%.

So rolling off “excess” margins it is: the Nasdaq had been north of 41% gains year-to-date before this week. The S&P had gained more than +17%. Both are robust levels; even with this September roll-off, they ought to perform historically well for the rest of the year — assuming annual trading behaviors continue to align.

We’ll hear from plenty of Fed members regarding their views on the monetary body’s decision to hold interest rate levels at 5.25-5.50% through at least their November meeting. This last hold was the second time in three meetings. Of course, monthly/weekly/quarterly data will dictate whether inflation is being successfully quashed in the overall economy, ideally without dropping into recession. To this point, Fed Chair Jerome Powell & Co. have shown a light touch: strong but patient, incremental. Today we’ll hear from Fed Governor Cook, Boston President Collins, Minneapolis President Kashkari and San Francisco President Daly.

After today’s open, S&P flash Services and Manufacturing PMI data comes out for September. Services are expected to tick up after coming down three straight months from its May cycle high, and remaining above the 50 inflection point to 50.7 (lows this past 12 months were sub-45 in December). Services have been volatile month-by-month since the pandemic. For Manufacturing, 48.3 is anticipated, above the 47.9 for August. December and June lows were down around 46.

A week from today will be the last trading day of this now-typically challenged September, and will include the August Personal Consumption Expenditure (PCE) report. The biggest focus there will be the ex-food and energy “core” print year over year, which came down to +4.2% in the last read. But between now and then we’ll be “muddle-through” mode: still a couple weeks away from Q3 earnings season and with importantly anecdotal, but not market-moving, reports such as Durable Goods Orders and Case-Shiller home prices.

Until next week, enjoy the first weekend of fall.

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